HB 1628 Real estate excise tax (REET)

Increasing the supply of affordable housing by modifying the state and local real estate excise tax

Sponsors: Chopp, Macri, Peterson, Alvarado, Taylor, Reed, Pollet, Lekanoff, Fitzgibbon, Berg, Riccelli, Davis, Street, Ramel, Duerr, Senn, Doglio, Cortes, Stonier, Gregerson, Mena, Berry, Fosse, Goodman, Bergquist, Slatter, Ormsby, Thai, Farivar, Simmons, Wylie

Status: *

Summary

• The portion of the selling price up to
  • $525,000 is taxed at 1.1 percent
  • $525,000 but less than or equal to $1,525,000 is taxed at 1.28 percent
  • $1,525,000 but less than $3,025,000 is taxed at 2.75 percent
  • over $3,025,000 is taxed at 3 percent.
• Adds a new state real estate excise tax threshold of $5,000,000 on January 1, 2025, with the portion of the selling price that is above the threshold taxed at a rate of 4 percent.
• Provides for the distribution of the increase in revenue from the new threshold over what would have been collected had the new threshold not been imposed, including to a newly created Developmental Disabilities Trust Account that can be used for housing support for individuals with developmental disabilities.
• Allows a county or city to impose an additional 0.25 percent real estate excise tax for the construction and support of affordable housing.
• Removes the expiration date on the ability to use certain local government real estate excise tax funds for facilities for those experiencing homelessness or for affordable housing, and removes a $1,000,000 limit on the annual use of such funds in larger jurisdictions.
• Creates a real estate excise tax exemption for certain sales or transfers of properties that qualify for a property tax exemption that will be used for a community purpose. 
• The REET Tax would be 4% of the selling price that is greater than $5 million, beginning January 1, 2025.
• The REET Tax shall be split as follows:
  • 30% to the Washington housing trust fund created in RCW 43.185.030;
  • 30% to the apple health and homes account created in RCW 43.330.184;
  • 15% to the developmental disabilities trust account created in the bill
  • 24% to the affordable housing for all account created in RCW 43.185C.190 for operations, maintenance, and service cost for permanent supportive housing as defined in RCW 17 36.70A.030.

Talking Points

• Would create a new tier in the state graduated REET Tax that would be the highest REET Tax in America on sales over $5 million.
• Higher taxes and increased administrative burden have proven to consistently drive housing providers out of the market and likely increase rental prices
• Allowing a county or to impose additional REET Taxes will not encourage the creation of naturally occurring affordable housing
• Increased REET Taxes will discourage housing investment and development in Washington State, worsening our housing crisis.
• Costs are already increasing for small housing providers, this will create even more burden on these small businesses